ILC ARTICLE

The Credit Hire Conundrum

31st October 2023

Compromise and trust are fundamental if the industry is going to create a revised and relevant General Terms Agreement (GTA) that meets the needs of today and ends the long-running friction that exists between insurers and credit hire companies.

That was the verdict of a panel discussion, ‘The Credit Hire Conundrum,’ which took place during ILC’s Exclusive Motor Claims Conference.

Taking part were James Driscoll, Senior Claims Manager, Motor Damage and Credit Hire, Aviva; Simon Gallimore, CEO, EDAM Group; Michael King, National Third Party Claims Strategy Manager, LV=; and Anthony Hughes, CEO, CHO. The session was moderated by ILC Founder, Chris Ashworth.

The GTA was established 24 years ago. The industry has moved on since then and in the last year the GTA Technical Committee has been working to establish an updated GTA. As a voluntary agreement, the end goal is to create a trading environment that is attractive to the industry, with claims handled quicker, with less operational cost and less likelihood of dispute.

James said, “When I heard about GTA 2 I thought we’d rip GTA up and completely change the rules around the settlement of claims. But over time we’ve moved to a more revised GTA and are working on the larger areas that are causing friction.”

Rates

The most significant of these is daily rates, which has long been an area of dispute between insurers and CHOs. The committee provided a temporary solution by establishing an interim rate review last year, and has since been working on a data-driven mechanism to decide rates going forward.

James continued, “We’ve been discussing rate reviews since 2018 but in the last three or four months there’s been the greatest shift in movement with collaboration from both sides working together to resolve it. But it will take some compromise. The GTA rate is never going to be right on a single claim. What you’re trying to find is a national rate that leaves both sides unhappy equal amounts of the time. It’s a difficult balance, but I think the way we’re moving forward now will resolve it.”

To make it stick though, trust between both sides is critical. In what has often been an adversarial relationship, this is not easy to achieve.

Simon said, “It’s evident there has been a complete breakdown of trust between credit hire organisations and insurers. Insurers use credit hire organisations more than anyone else and are happy to put their customers there, but then there is this mistrust when it comes to the claims side. That is the biggest roadblock we need to remove. We need trust on both sides, but it is starting to happen. We’ve made more progress than I expected.”

Michael agreed: “Last year’s interim rate review was a positive and now we need to convince people that the mechanism we’re trying to move towards will be a simpler and more effective way of managing the rate. From the insurer’s perspective, they need to understand what we’re doing and why we’re doing it. Trust has been an issue in the past so we need to give confidence that this will be a sensible and pragmatic way forward. Agreeing that rate methodology mechanism will be the first big step. We shouldn’t underestimate the size of this task, but we feel we’ve got a better chance of agreeing that than we’ve ever had in the past.”

New role

To build on this momentum the committee is hoping to appoint a Chairperson by the end of the year. This could be a decision-making role and their remit will be to provide further direction going forward.

Michael said, “I see the Chairperson as someone who will be there to assist and guide in decision-making rather being in a formalised CEO-type role. But if we do appoint an independent chair, get a mechanism for rate, and move away from clogging up the technical committee with these conversations, that would be the way forward.”

Looking ahead, there are hopeful signs of a positive outcome.

Anthony concluded, “The GTA Technical Committee has made real progress in the last 12 months and collaboration between the CHO and insurer community has been really encouraging. We have agreed an interim rate review, which is the perfect definition of compromise, and have begun conversations about how else we can evolve an agreement that is 24 years old. We’re trying to move forward specific issues now and those discussions are very constructive.

“If we can get to a point by the turn of the year where we’ve appointed a chair and in principle got an agreement for what the rate will be for the period between now and the next review, and a mechanism for that to be reviewed in a simpler way, that will be a huge step in the right direction.”

The Exclusive Motor Claims Conference was held at Landing Forty-Two, London, supported by ILC’s Motor Corporate Partners: Activate Group, AkzoNobel, Autoglass, BHR Assist, CAPS, Carpenters Group, Copart, DAC Beachcroft, e2e, Entegral, Enterprise, Gemini ARC, GT Motive, Innovation Group, Kennedys, S&G Response, Solera Audatex, Synetiq and Thingco, and sponsored by headline partner Enterprise along with sponsors BHR Assist, Clearspeed, EDAM Group, LexisNexis Risk Solutions and Wiser Academy.